UPM Annual Report 2022

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2022

ACTIONS FOR ENVIRONMENT

eral projects have already been completed and new potential projects are actively being sought and identified. To steer our activities and to mea sure our impact on biodiversity, we have launched a new indicator with a target of 500 km of obstacle-free streams by 2030. By 2022, we reached 174 km in total. Our largest project was the restoration of two rapids that reopened over 150 km of routes for migratory fish (left). Mills and biodiversity Industrial emissions to water and air also have an impact on biodiversity. Emissions change the ecological living environment of different species. In the past, acidifying flue gases worsened air quality, for exam ple. Today, thanks to modern technology, harmful emissions can be neutralised, allowing sensitive species such as lichen to return. Water quality has also improved as a result of advanced best available techniques. For example, at the UPM Fray Bentos pulp mill in Uruguay, we monitor effluent discharge to the river as well as water quali ty and biology in the river itself, together with emissions to the air, air quality and soil quality. Studies show that, since the start-up in 2007, mill operations have had no measurable negative impact on biodi versity. In addition to the actions taken in line with the global forest biodiversity programme, many mill sites have actively been promoting biodiversity at a local scale. UPM Schongau in Germany and UPM Jämsänkoski in Finland have created doz ens of bird nests and left part of their mill area in its natural state, for example.

biodiversity activities as part of the new global Forest Action programme, launched in 2022. The programme considers the var ious regional regulation, requirements and guidelines regarding forest management in Finland, Uruguay and the US. In 2018, we set a new target of net positive impact on biodiversity in our forests in Finland with dedicated key performance indicators to measure the progress. In Finland, we have nine indicators: share of broadleaved trees, amount of dead wood, forest age, forest structure, protected areas, valuable habitats, habitat restoration, species and habitat projects and indicator development. In 2022, all quantitative indicators showed a positive trend. The share of broadleaved trees increased and the protected area continued to grow. In Uruguay, plantations grow on grass lands formerly used for cattle grazing. The biodiversity values of the area are assessed before the plantation is established, and all valuable biodiversity hotspots and native forests are protected. Our work fo cuses on invasive species control and the active management of protected habitats. The majority of species indicators from the last five years show a positive trend of occurrence compared to the last 15 years. In our forestry operations in the US, we consider and restore the forest’s natural diversity by aligning management actions with the forest’s natural ecology. All har vest sites are managed so that deadwood is retained at sustainable levels. In 2022, 368 hectares were restored with natural species mixtures. Forest certification plays a crucial role in managing biodiversity in wood sourcing. Since 2022, biodiversity-related activities in all regions are incorporated in our Forest Action programme. Water and biodiversity In Finland, our hydropower plants impact the environment by altering river flow rates and their ecosystems. We have taken voluntary measures to restore migratory fish stocks, in addition to statutory levies on fisheries, to mitigate the production impacts. UPM’s stream water programme strives to remove obstacles to fish migration and restore fish stocks all around Finland. Sev

ENHANCING BIODIVERSITY

Biodiversity is instrumental to ensuring the vitality of our business.

Biodiversity refers to the diversity and variation of species and ecosystems on our planet. According to the UN, and despite ongoing efforts, biodiversity is deteriorat ing worldwide. This decline is projected to worsen if no action is taken. Mitigating climate change is the single most important action to improve biodiversity. Our operations are widely linked with biodiversity. Our most significant impacts on biodiversity take place in wood sourcing. Biodiversity is instrumental in maintaining healthy forest growth and ensuring that for ests adapt to the changing climate. Biodiver sity also plays an important role in ensuring the sustainability of our energy business and in particular of our hydropower plants. Rivers have been dammed, which has affected the flows and changed the living conditions of migrating fish and other river-dwelling fauna. The emissions our production sites generate can have a nega

tive impact on biodiversity. For example, the potential depletion of oxygen caused by wastewater load impacts the living con ditions at receiving water courses. We want to increase the role of biodiver sity in our business to respond to the current and future ecological challenges. In 2020, we linked the margin of a EUR 750 million revolving credit facility to the biodiversity enhancement in our forests in Finland. In 2022, we further strengthened this link by including biodiversity as a measure in UPM's management remuneration. We have also joined the Science Based Targets Network (SBTN) Corporate Engagement Program to develop and test tools, methodology and guidance for setting science-based targets for the preservation of nature. Forestry and biodiversity We safeguard biodiversity in our own forests and continue to implement our

IMPACT • Healthy forests ensuring the vitality of our business • Resilient forests adapting to changing climate • Increased variety of species and thriving ecosystems

CASE

TARGET • Enhancing biodiversity

DEADWOOD AS A MEASURE OF BIODIVERSITY

OUR WAY • Global forest biodiversity programme since 1998 • Global Forest Action programme since 2022

In 2018, we set the target of positive impact on biodiversity in our forests in Finland while efficiently producing high-quality wood raw material. In 2022, we set a new target to double the amount of deadwood in our commercial forests from the current level of about 5 cubic metres to 10 cubic metres per hectare. In UPM’s protected areas and commer cial forests where a specific nature manage ment target has been set, the deadwood target is 20 cubic metres per hectare. The new targets are part of our forest responsi bility programme, UPM Forest Action. The indicators used to measure biodiver sity are based on comparing natural forests with commercial forests. Studies have shown that one clear difference between these two types of forests is the amount of dead wood. More than a fifth of Finland’s forest species—fungi and insects in particular— depend on deadwood at some point in their lives. Buffer zones for bodies of water also increase the amount of deadwood. The amount of deadwood in UPM’s forests is based on data from the Nation al Forest Inventory (VMI) of the Natural Resources Institute of Finland (Luke). We will also study the accumulation of deadwood and its impact on biodiversity in co-opera tion with Luke.

• Stream water programme since 2016 • Best Available Techniques used at production sites • Indicator and follow-up development

CASE

MORE SPAWNING AREAS AND WATERWAYS FOR MIGRATORY FISH

In Central Finland, we dismantled the Arva jankoski dam, replaced the old fishway with a natural fishway and built new spawning sites. The 19-kilometre rapids route is an important spawn ing river for the endangered Päijänne trout. In to tal, the restoration of the rapids freed up a habit of more than 55 kilometres for migratory fish. Our aim is to revive stream species in locations offering the best conditions for their natural suc cess. The measures must be designed to best suit each body of water. Our work to protect species will continue in the coming years.

TARGETS 2030

Positive impact on forest biodiversity

There are many unnecessary migratory barriers such as defunct dams in Finland, and by remov ing them, biodiversity can be restored. In 2022, we restored the Sapsokoski and Arvajankoski rapids as part of our stream water programme. The restoration of the Sapsokoski rapids in north-eastern Finland provided a better spawn ing habitat for trout. We returned the stones we had removed from the dam back into the water course and built some 30 gravel beds at various locations along the rapids.

Overall positive development measured in Finland and in Uruguay

Value from responsibility on page 28 Our 2030 responsibility targets on page 30 Climate-positive forestry on page 82 River Kymi's condition improved on page 91

www.upm.com/responsibility

www.upm.com/responsibility/forests

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022